EOH points to reduced losses as it works through its turnaround plan
Troubled ICT group EOH said on Thursday (19 March) in a trading statement for the six months ended January 2020, that it expects improvement of at least 64% to the previously reported total loss per share.
The group said it expects an improvement of at least 47% to the headline loss per share (HLPS) in the prior reporting period.
EOH is currently in a turnaround phase after coming under enormous pressure following several allegations of corruption in the group.
“EOH said it is approximately twelve months into a turnaround plan that is expected to take at least two years. Good progress on key strategic initiatives in respect of the evolving business model, cost savings and capital structure initiatives has continued over the past six months.
“The group continues to work through remaining, inherited legacy issues. These include the limited group of identified public sector contracts together with non-core under-performing Nextec businesses and the interest burden associated with the inherited debt,” it said.
The group said it has further identified a need for a cost optimisation program which has resulted in 21 rental properties being exited in the last six months as well as reduction of more than 1,000 people through business as usual efficiency measures.
“Following sound progress and exceeding the R1 billion target within twelve months, management is continuing with disposals in line with its stated strategy,” it said.
Total cash balances remain consistent with prior comparative periods as liquidity remains stable, it said.
EOH said that the iOCO business has performed well evidenced by a stabilisation of the core business and the contracting sales pipeline with gross profit margins above 20% for the period under review, before taking account of the public sector contracts mentioned above.
“The public sector remains important for the group, however, 8 of the public sector projects remain problematic out of the 54 originally identified as requiring attention,” it said. Management is actively working with these customers to remedy the pertinent issues, the company said.
It said that its IP businesses also performed well over the period, recording sound revenue growth as well as retaining gross profit margins above 30%.
“As has been previously communicated to the market, the majority of these businesses are being disposed of in order to normalise the capital structure and are classified as discontinued. Significant progress in this regard has been made. Non-binding offers have been received and the process is ongoing.
“Nextec remains challenging, with the majority of these businesses unlikely to form part of the Group going forward. More than 40 businesses have been sold or closed since 31 January 2019.”
EOH said that while the recent global outbreak of Covid-19 may have an impact on the business, it is difficult to quantify with any certainty, the magnitude of the impact at this time.
The company will publish its interim results on or about 7 April 2020.
Shares in the group climbed more than 5% in afternoon trade on Thursday.
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